BPER’s Sergio Donadia: Healthcare and industrials to thrive in 2025

In this excerpt from our 2025 European M&A Outlook Report, which features insights from 12 leading European dealmakers, Sergio Donadio, M&A Director, BPER Corporate & Investment Banking, discusses the potential for an upturn in M&A in the next 12 months, how PE could drive deals and the sectors that are primed for growth.

Global M&A activity in 2024 was on the rise – certainly in value if not volume terms after a disappointing 2023 – do you expect more activity and how do you view the European M&A market for the next 18 months and beyond?

This has certainly been a challenging year for European dealmaking, particularly for the midmarket. I expect a rebound in activity in 2025, driven by sponsor-led deals benefiting from the ongoing cuts to interest rates and more affordable financing. This could aid dealmaking, narrowing the valuation gap both within the mid-market and at the top end. We believe that some large public deals within the infrastructure and regulated assets space are on the horizon.

Traditionally, this is a strong source of deal activity in Italy, particularly in the transportation, energy, airports and tolls sub-sectors. These large infrastructure deals will contribute strongly to the M&A pipeline as we move into 2025. Over the past year, we have seen several major deals put on hold: but it is likely that they will provide a jumping-off point for the 2025 pipeline, becoming unlocked on the basis of encouraging annual final financial figures.

What do you expect to be the primary driver of M&A activity in 2025?

The impressive amount of dry powder in the market, which continues to grow, will be the primary driver of M&A. On the one hand, a large part of it was related to cheap financing, which was a feature of the market in the post-Covid era. On the other hand, institutional banking has also increased: for pure commercial banking players, investing in alternative assets has become an additional revenue stream in a low-interest rate scenario.

After the increase in interest rates stimulated more restrictive monetary policies in the last two years, we are now experiencing more progressive cuts again and a reversion to more affordable levels of financing costs. This will most probably have a positive impact on the envisaged 2025 M&A upturn.

Which sectors, if any, do you believe will move to more aggressive growth strategies in their M&A programmes, as opposed to more defensive dealmaking?

There are a few sectors that will continue to pursue aggressive growth strategies and be top of investors’ minds in 2025.

Healthcare and pharmaceuticals are fruitful markets reporting robust profitability and high growth margins. Italy’s fragmented medical devices market, in particular, has attracted the interest of major funds.

The industrials space is also set to be active in 2025. In Italy, a group of players with impressive margins along with premium production, research and innovation capabilities are driving activity. Financial sponsors will look at the industrial sector with particular interest, especially in precision and high-end products for critical applications – these are sub-sectors in which Italy can boast unparalleled capabilities.

The food and beverage space also has strong potential for dealmaking; as well as the cosmetics sub-sector which is attracting plenty of interest in the high-end and professional segments.

We are also seeing interest from financial sponsors looking to integrate businesses across the value chain in order to gain operational leverage. As a consequence, packaging and packaging machinery industries could also be a prime target space.